JP摩根中国石油化工行业报告 28页

'Completed04Mar201803:18PMHKTDisseminated05Mar201812:15AMHKTAsiaPacificEquityResearch05March2018ChinaPetrochemicalsFeedbackfromZhejiangHuafei-Firstwaveofex-Chinarecyclingcapacityby2H18?JanwastePETimportsfalltozeroBackground:WerecentlymetMrCaoWeidong,CEOofZhejiangHuafeiAsiaOils,refiningandRecyclingResources,alargeChinesePETrecyclingcompany.HeisalsothepetrochemicalschairmanoftherecycledPET(re-PET)associationofChinaandoperatesParsleyRuiHuaOngACrecyclingcentersinChina,SEAandNorthAmerica.Buyersofhisrecycled(852)2800-8509PETpellets/PSFincludeglobalbrandslikeCoca-Cola,NikeandUnilever.parsley.rh.ong@jpmorgan.comAsidefromPET,ZhejiangHuafeialsoproducesrecycledPP,PSandABS.BloombergJPMAONGJ.P.MorganSecurities(AsiaPacific)LimitedChinaflipsinto50%deficitforre-PETin2018–DomesticrecycledScottLDarlingPET(highend)tradesatpremiumtovirginPET:Sincethewasteplastic(852)28008578importbanwasannounced,mostindustryparticipantshaveexpectvirginscott.darling@jpmorgan.comPETtofillmostofthe~1.5Mtdeficitcausedbytheban.However,despiteJ.P.MorganSecurities(AsiaPacific)Limitedattractivepricing(re-PETusuallytradesatRMB1,000/tdiscounttovirgin),AjayMirchandanivirginPEThasbeenunablefullytosubstitutere-PET,asglobalbrandslike(65)6882-2419Coca-Colademandrecycledplasticstomeetenvironmentalgoals.Re-PETajay.mirchandani@jpmorgan.comproducesonly1/30carbonemissionsversusvirginPET.J.P.MorganSecuritiesSingaporePrivateLimitedGlobalbrandspledgetouserecycledplastics:In2017,Coca-ColaAndreChang,CFAannounceditwoulduse50%re-PETinitsUKbottlesby2020(globallyby(886-2)2725-98722030),whichMrCaobelievesmightincreaseitsre-PETdemandby>20%.andre.ch.chang@jpmorgan.comJ.P.MorganSecurities(Taiwan)LimitedSimilarly,Unileverhaspledgedtouse100%recycledpackagingby2025.SumedhSamant,CFAWastePETimportsfallto(almost)zeroinJanuary–Growingpilesof(66-2)6842682rubbishinEurope,USandAsia:ChineseimportsofwastePETfellto2ktsumedh.y.samant@jpmorgan.cominJanuary,-99%y/yandsharplydownvsavgmonthlyimportsof211ktJPMorganSecurities(Thailand)Limitedand181ktin2017/2016respectively.SinceChina’sbanwentintoeffect,PinakinParekh,CFAwasteplasticrecyclableshavebeenpilingupin,amongothers,HongKong(91-22)6157-3588andtheEU,withthelatterproposinganewtaxonpackaging(link).pinakin.m.parekh@jpmorgan.comJ.P.MorganIndiaPrivateLimitedChineserecyclersflocktoSEA–firstwaveofnewcapacityin2H18?ShogoUmedaRawwasteplasticpricesinChinaaredoubleex-Chinaprices–prompting(81-3)6736-8658ChineserecyclerstorelocatetoSoutheastAsia,wheretheycanenjoyNPMshogo.umeda@jpmorgan.comof>15%,thehighestinyears.MrCaohaspersonallyledaboutsixChineseJPMorganSecuritiesJapanCo.,Ltd.researchexpeditionsacrossAsiaandgiventypicaleight-monthleadtimes,hebelievesthecompaniesthatmadeinvestmentsimmediatelyafterthebanFigure1:ChinaPEimportssurgeinJanwasannouncedinmid-2017willseecapacitycomeonlineby2H18.2018(kt)1,400Enviablere-PSFmarginsofRMB1,500/tmightbeerodedtoRMB500/tintwoyears:Withnewcapacitycomingonline,MrCaobelievesmargins1,200willbequicklyerodedto~RMB500/tintwoorthreeyears.1,000800JanuaryvirginPEimportssurgetorecordhigh:ChinaPEimportsrose600to1.29MtinJanuary(+19%y/y),anewrecordhigh–likelyimpactedbythe400wasteplasticimportbanandrestocking(seenote¬e).naberarpyanulugupetcvoceJFMAMJJASONDPET,PTA,MEG&PXstrongfor1H18butmightcomeunderpressure201420152016in2H:WithinAsia,NanYaPlastics(N)andIVL(OW)aremostleveraged20172018topolyester,whilerefinersRIL(N)andS-Oil(N)areleveragedtoPX.Source:Customs,J.P.MorganSeepage23foranalystcertificationandimportantdisclosures,includingnon-USanalystdisclosures.J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.www.jpmorganmarkets.com ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comTableofContentsFeedbackfromZhejiangHuafei..............................................3Wasteplasticsimportbanandregionaloutages/ADDsgiverisetomarginstrengthinpolyesterchain........................................................................................................4Whatisrecycledpolyesterandwhydoesitmatter?............5~12%ofChina’spolyestersupplyisrecycled..........................................................5Wasteplasticimportbanexpectedtoresultin51%domesticre-PETdeficitin20186China’sabilitytorampuprecyclingofdomesticwasteislimitedinthenearterm....7Re-PETshortagepushesupvirginPET,PTA,MEGprices......................................7PETrecyclersflocktoSEAtocapturestrongrecyclingmargins..............................8IsChina’sre-PETindustrydead?Notnecessarily–virginPETcannotfullysubstituterecycledproduct......................................................................................9Implicationsforvirginpolyesterandfeedstocks................10#1:Polyester–Marginsstarttodeteriorateasfeedstockcostsrise;Pricedownsidein2H18?....................................10PETspreadsathighestlevelsinceoilpricecollapse..............................................10JapanMoFfinalizesADDsonChinesePETexports,whichwilllastfor5years.....10PETspreadshaverunaheadofcottonfundamentals..............................................11ChinesepolyesterinventoriesbuiltrapidlyoverCNY............................................112018environmentalprotectiontaxmightbenegativeforPETdemand...................11NewvirginPETsupplycomingonline,whileofflinecapacitiesarerestarted..........12#2:PTA–marginstrengthfromsolidPETdemand............12#3:MEG–spreadstoaverage$200/tin1H?.......................13#4:PX–NghiSonplantstart-upmightpressurespreads.15Conclusion..............................................................................16Regionalpetchemcomps......................................................162 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comFeedbackfromZhejiangHuafeiAboutZhejiangHuafeiStrongre-PSFmarginsexpectedtofallby50%:CountertootherChinesecommodityconsultants,MrCaodoesnotthinkcurrentstrongrecycledPSF(polyesterstaplefibre)marginsof~RMB1,000/tcanbesustained.HeexpectsitZhejiangHuafeiisalargetofalltomorenormalizedlevelsof~RMB500/tby2019/20.Thehistoricalfive-Chineserecyclingcompany,yearaveragewasRMB300-400/t,and2017marginsofRMB1,000/tthehighestdealingprimarilywithhighinrecenthistory.qualityrecycledPET,PP,ABSandPS.ThecompanyisbasedImportbanacceleratesindustryconsolidation;RecyclingmarginsinZhejiang,withbranchesinstructurallyunderpressureinlowoilenvironment:MrCaobelievesChina’sWuhanandHunan.wasteplasticimportbansimplyacceleratesthenecessaryclosure/consolidationofsmallrecyclingplants,whicharestructurallyunderpressurefromalowoilAsof2016,itwastheonlypriceenvironment(recyclingprofitswillbegoodat$80/bbloilandabove,badindomesticplasticrecycling$50-70/bblenvironment).ThenumberofbankruptciesperannumofChinesecompanytoachieveGRSrecyclingcompaniesbeforeandafterthewasteplasticimportbanannouncement(GlobalRecyclingStandard)hasnotchanged.certification.ItalsoreceivedNoplanstoapplyforwasteplasticimportlicence:MrCao’scompanyhasnotEuCertPlastcertificationinappliedforawasteplasticimportlicencethisyear,asrawwasteplasticpricesSeptember2017.havegoneupalot,andeveniftheydoobtainthelicence,thelevelofgovernmentscrutinywillbehugeanditmightbedifficulttooperate.JPMcomment:DuringthelastroundofenvironmentalinspectionsinJuly2017,AboutCaoWeidongoutof1,792recyclingcompaniesinspected,~60%failedinspectionsandwerepunished,62ofwhichwerepolyesterrecyclingcompanies.Inaddition,undertheMrCaoistheCEOofZhejiangnewimportregulations,wasteplasticimportersmustalsobetheend-user,whichHuafeiRecyclingResources.mightpreventsometradersfromapplyingforlicences.HeisalsothechairmanoftherecycledPETassociationofOnly19companieshavereceivedwasteplasticimportquotasin2018(firstChina,andoperatesrecyclingfivebatches),amountingtoonly20ktforthewholeyear.Incomparison,overcentersinChina,SEAandthepastthreeyears,themonthlyaveragewastePETimportvolumewas150-NorthAmerica.300kt.Domesticwasteplasticpriceshaveskyrocketedsincetheban.Anecdotally,BuyersofhisrecycledPETsellingpriceforrecycledmaterialis~RMB9,400/t.Processingcostispellets/PSFincludeglobal~RMB1,200/t.brandslikeCoca-Cola,NikeInSEA,recyclingprofitscanreachRMB1,500/t.Hence,manycompaniesandUnilever.arevyingtomoveChinaoperationsoverseastocountrieslikeMalaysia,ThailandandVietnam,wherethelabourcostisonlyhalfthatofChina,rawMrCaoinitiallystartedhismaterialcostsarehalfversusChinaandtaxislower.recyclingbusinessintheUS,andestablishedtheChinaTofulfilstrongdemandforbuildingplantsex-China,Chinarecyclingbusinessin2013.equipmentmakershavebeenfullybookedtillaroundJuly/August2018.Therecyclingindustryisonewithrelativelysimpletechnology,lowbarriersAsidefromPET,Zhejiangtoentryandlowcapex.Additionally,thehighmarginsituationhasalreadyHuafeialsoproducesrecycledattractedmanynewentrants.ItisanindustrywherecapacityishugebutPP,PSandABS.utilizationslow.ThisisoneofthereasonsMrCaobelievesthecurrentmarginstrengthisunlikelytobesustained.Currently,somegradesofhighendrecycledPETaretradingatapremiumtotheirvirginPETequivalent.Normally,re-PETshouldcommandadiscountofRMB800-1,000/ttovirginPETunderan$80/bbloilpricescenario.However,virginPETpriceshavebeenunderpressurefromlowoilpricesandnewcapacityadditions(thoughtemporarilysupportedbyoutagesandJBFbankruptcy).Basedonproductqualityalone,thepremiumre-PETiscurrentlycommandingtovirginPETisunsustainableandsupplytypicallyexceedsdemand.3 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comThestructuralimportanceforthere-PETindustrycomesfromits“Green”angle.CO2emissionsfromre-PETisonly1/30thatofvirginPET.Globalbrandswillalwayshavedemandforrecycledplasticstohelpmeettheirenvironmentalgoals.Hence,Chinesecompaniesaimingtosurviveintherecyclingindustryshouldfocusonimprovinglocalrecyclingratesandrawmaterialacquisitioncost,productquality,scale,environmentalprotectionandrecycling/recoverytechnology.Firstwaveofex-Chinarecyclingcapacityonlineby2H18?Afterthewasteplasticimportban,manyChinesecompaniesmovedtheirrecyclingoperationsoverseas.Infact,MrCaoledaboutsixChineseexpeditionsacrossAsia,andmanyChinesecompanieshavestartedconstructingrecyclingoperationsex-China.MrCaobelievesthecompaniesthatfirstmadeex-Chinacapacityinvestmentsimmediatelyafterthewasteplasticimportbanwasannouncedinmid-2017willstartoperatingsoon.Asfirstmovers,theywillbeabletocapturethecurrenthighmarginenvironmentofRMB1,000-1,500/t(NPM~15%).Typicallytheconstructionleadtimeiseightmonths.Byend-2018,MrCaobelievesatleast10+companieswhicharealreadyconstructingrecyclingplantsex-ChinawillcomeonlineandsupplythecleanrecycledproducttoChinaandothermarkets.MrCaoisbearishonPSFrecyclingmarginsandbelievessmall/low-qualitypolyesterrecyclingcompanieswillbeforcedtoclose/gobankrupt,helpingtoaccelerateindustryconsolidation.Wasteplasticsimportbanandregionaloutages/ADDsgiverisetomarginstrengthinpolyesterchainFigure2:Asiapolyesterchainmargins–spoteconomics($/tonne)Source:IHS,J.P.Morgan4 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comWhatisrecycledpolyesterandwhydoesitmatter?~12%ofChina’spolyestersupplyisrecycledEveryyear,Chinaconsumes~40Mtofpolyester,or57%oftheworld’stotal.Thelargestdemandoutletsarefromclothing/textilemanufacturersandplasticbottlemakers.In2016,~12%ofChina’spolyestersupplywasrecycled.Asoneoftheworld’smostpopulousnations,Chinahasitsownsupplyofwasteplasticbottles,butapproximatelyhalfofitsrecycledPETsupplycomesfromimportedbottlebales.Thisisduetoitsrelativelyundevelopeddomesticrecyclingsystem.In2016,anestimated~60%oftheworld’strashendedupinChina,with2017’saward-winningdocumentary"PlasticChina"(link)highlightingenvironmentalandhealthissuesarisingfromtheforeignwastetrade.Figure3:Importedbottlebales(wastePET)Source:Wikipedia,J.P.MorganFigure4:ChinawastePETimportsfalltoalmostzeroinJanuary2018(kt)300850800250750200700650150600100550500504500400333344445555666677778-1n1r-1l-1t--1n1r-1l-1t--1n1r-1l-1t--1n1r-1l-1t--1n1r-1l-1t--1naJpAuJcOaJpAuJcOaJpAuJcOaJpAuJcOaJpAuJcOaJImport(Kt)Importprice($/t,RHS)Source:Customs,J.P.Morgan5 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comHongKong,JapanandSEAFigure5:2017ChinawastePETimportsbycountryoforiginwerethelargestsuppliersofOtherHongKongwastePETtoChinain2017.25%18%Malaysia2%JapanTaiwan17%3%Philippines4%IndonesiaMexico7%4%VietnamUSAThailand6%7%7%Source:Customs,J.P.MorganWasteplasticimportbanexpectedtoresultin51%domesticre-PETdeficitin2018TherearethreeprimaryInJuly2017,inanefforttoreducepollutionfromtheimportedwastetrade,China’smethodstofillthere-PETstatecouncilannouncedthatitwouldbantheimportofwasteplastics(PE,PET,deficitcausedbythewastestyrenepolymers,PVC),effective1January2018.ThiswouldresultinwastePETplasticimportban.importsfallingtozero,andforChina’s2.2Mtofrecycledpolyestersupplytobereplacedviathreeprimarymethods:(1)replacementwithvirginpolyester,(2)morerecyclingofdomestictrash,(3)recyclingofwasteplasticsoverseas(e.g.SEA)andexportingthecleanrecycledproducttoChina.Figure6:2017Chinawasteplasticimports(kt)2,5002,0001,5001,000500-PETPEPVCPSOtherSource:Customs,J.P.MorganWastePETimportsfellbyOfthethreemethods,#1wasexpectedtobethedominantsolutionin1H18,430kty/yin2H17(-46%y/y).supportingPETpricing,#2wasexpectedtobedifficulttoimplementwithoutfurtherpolicysupport,while#3wasexpectedtotaketimeasexistingex-ChinarecyclingIndustryestimatesindicatecentreswouldnotbeabletocopewiththelargevolumesofdisplacedwasteplasticsthatthisresultedin200-unlessnewcapacitywasbuilt.Aswasteplasticimportsstartedfallingpostthe250ktofincrementaldemandannouncementoftheban,ChineseconsultantZhejiangHuaruiestimatestherewasforvirginpolyester.200-250ktofincrementaldemandforvirginpolyesterfromswitchingbyconsumersofrecycledpolyesterin2H17.Moreswitchingisexpectedin2018.6 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comChina’sabilitytorampuprecyclingofdomesticwasteislimitedintheneartermItmightbechallengingtoInthenearterm,itmightbedifficultforChinatoincreaserapidlyitsdomesticsignificantlyincreaseChina’srecyclingrate,duetoitsrelativelyundevelopedrecyclingsystem,whichresultsinadomesticrecyclingrateveryhighcostassociatedwithsorting/categorizingthetrashandcleaningit.IndustrywithoutmorepolicysupportconsultantsbelieveitwouldtakeatleasttenyearsforChina’srecyclingsystemtoandinvestment.catchupwithdevelopednationslikeJapan’s.Inaddition,therearelittletonosubsidiesforthisindustryatpresent.Figure7:ChinaplasticrecyclingFigure8:JapanrecyclingbinsSource:plasticchina.org,J.P.MorganSource:Wikipedia,J.P.MorganRe-PETshortagepushesupvirginPET,PTA,MEGpricesOnly20ktofwasteplasticIn2018sofar,only20ktofwasteplasticimportquotashavebeenawardedto19importquotashavebeencompaniesinthefirstfivebatches(full-yearquota),afarcryversus5.8Mtofwasteawardedfor2018sofar.plasticimportsin2017.Thishasresultedina30(JPMe)to51%(Chineseconsultant)deficitindomesticre-PETin2H17and1H18,whichhaspushedupThisisexpectedtocauseapricesforbothre-PETandvirginPET,withgenerallyimprovedmarginsacrossthe30-51%deficitinChinesere-polyesterchain.PETin1H18.Figure9:Chinapolyesterchainprices(RMB/tonne)1000090008000700060005000400066666666667777777777778881r-1r--1y-1n1l--1g-1p1t--1v-1c-1n-1b1r-1r--1y-1n1l--1g-1p1t--1v-1c-1n-1b1r-aMpAauJuJuecOoeaJeFaMpAauJuJuecOoeaJeFaMMASNDMASNDPTAMEGPETchip(waterbottle)Chip-spunPOY75D/36FPSF1.4D*38mmSource:sci99,J.P.Morgan7 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comPETrecyclersflocktoSEAtocapturestrongrecyclingmarginsEx-ChinaPETrecyclerscanGivenlimiteddomesticsupplyofrawwasteplasticmaterialposttheimportban,enjoymarginsofRMB1,000-domesticpricesquicklyrosetoalmostdoubleex-Chinaprices.Accordingto1,500/tcurrently.calculationsbyMrCao,aPETrecyclingplantinSoutheastAsiacouldenjoymarginsofuptoRMB1,000-1,500/t,orNPMof15%–muchhigherthantypicalThefirstwaveofrelocatedlevelsofRMB300-400/t.Givenstrongmargins,companieshavebeenrushingtoex-Chinarecyclingplantscompleteandstartoperations.Chinaistypicallyanetexporterofcleanrecycledwillstartin2H18,resultingpolyesterstaplefibre(PSF).2017netexportswere846kt,-4%y/y(Figure12),theinapossible285%riseinfirstdeclinesince2013atleast.Weestimatethatthismightfallto~700ktin2018,ascleanre-PETimports.thestart-upofex-Chinacapacitypressuresmargins.Figure10:Chinacleanre-PETimportprice-wastePETimportpricedifferential($/t)Currently,thespread1,300140betweenwastePETand1,200120cleanrecycledPEThas1,100100reached$1002/t–thehighestsinceoilpricecollapse.1,00080900608004022223333444455556666777788-1n1r-1l-1t--1n1r-1l-1t--1n1r-1l-1t--1n1r-1l-1t--1n1r-1l-1t--1n1r-1l-1t--1n1r-aJpAuJcOaJpAuJcOaJpAuJcOaJpAuJcOaJpAuJcOaJpAuJcOaJpACleanimportedre-PETvswasteimportedre-PETpricedifference($/tonne)Oilprice($/bbl,RHS)Source:Customs,Bloomberg,J.P.MorganDomesticrecyclingmarginsFigure11:Re-PETcashflow(RMB/tonne)starttofallfromhighsofRMB1,500/tasfeedstockcostsrise.Source:ZhejiangHuarui,J.P.Morgan8 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comChinanetexportsofre-PSFFigure12:Chinanetexportsofre-PSFmightfallin2H18asnewex--Chinarecyclingcapacity(100)comesonlineandpushes(200)marginsdown.(300)(400)(500)(600)(700)(800)(900)(1,000)2,0132,0142,0152,0162,0172018eSource:Customs,J.P.MorganIsChina’sre-PETindustrydead?Notnecessarily–virginPETcannotfullysubstituterecycledproductDespitemoreattractiveFigure13:Globalbrands’commitmenttorecycledplasticusepricingforvirginPET,CompanyBusinessPledgeglobalbrandscontinuetoBottlesmadefrom50%recycledplasticCoca-ColaSoftdrinks(UKby2020,Globalby2030)demandrecycledplasticstoUnileverClothes100%packagingmadefromrecycledplasticby2025loweremissionsandmeetEvian/DanoneMineralwater100%bottlesmadefromrecycledplasticby2025theirenvironmentalgoals.EcoverCleaningproducts100%bottlesmadefromrecycledplasticby2020Werner&MertzCleaningproducts100%packagingmadefromrecycledplasticby2025.L’OréalMakeup/beauty100%plasticpackagingrecyclableby2025AmcorPackagingAllpackagingtoberecyclableby2025MARSConfectionery100%packagingrecyclableby2025WalmartSupermarket/retail100%privatebrandpackagingrecyclableby2025Marks&SpencerRetailUKpackaging100%recyclableby2022PepsicoSoftdrinks100%packagingrecyclableRepresenting6Mtpaplastic/packagingdemandSource:EllenMacArthurFoundation,CNBC,newswires,J.P.Morgan9 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comImplicationsforvirginpolyesterandfeedstocks#1:Polyester–Marginsstarttodeteriorateasfeedstockcostsrise;Pricedownsidein2H18?PETspreadsathighestlevelsinceoilpricecollapse–Thewasteplasticimportban,Figure14:Asiapolyesterspread($/t)ADDsandJBFbankruptcy180contributedtostrengthinAsia170PETspreadsoverthepastsix160150months.1401301201101009080Source:Bloomberg,J.P.MorganInDec2017,theJapaneseAnadditionalpositive–JapanMoFfinalizesADDsonMinistryofFinancefinalizedChinesePETexports,whichwilllastforfiveyearsADDsonChinesePETexports,whichwilllastforfiveFigure15:Japananti-dumpingdutiesonChinesePETProducerADDrateyears.ThefollowstheprelimZhejiangWankai51.0%ADDsthatJapanimposedonChinaResources51.4%ChineseexportsinSeptemberFarEasternShanghai(includingOrientalIndustries(Suzhou)Ltd.)53.0%2017.YishengHainan53.0%GuangdongIVL39.8%Sanfangxiang39.8%GiventhatJapanisthelargestDragonSpecialResin39.8%PETnetimporterinAsiawhileOthers53.0%ChinaisthelargestPETSource:ICIS,J.P.Morganexporterglobally,weexpectthistobeslightlypositiveforspreadsinAsia,thoughnotemajorityofthebenefitislikelyalreadyreflectedincurrentpricing.10 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comHowever,PETspreadshaverunaheadofcottonfundamentalsFigure16:Asiapolyesterchainspreads($/tonne)1,1001,00019090017080070015060013050040011030090200701000500001112223334445556667778-1b-1n1t--1b-1n1t--1b-1n1t--1b-1n1t--1b-1n1t--1b-1n1t--1b-1n1t--1b-1n1t--1beucOeucOeucOeucOeucOeucOeucOeucOeFJFJFJFJFJFJFJFJFPETPXPTAMEGCottonprice(cents/lb,RHS)Source:Bloomberg,IHS,J.P.MorganChinesepolyesterinventoriesbuiltrapidlyoverCNYFigure17:Chinapolyesterinventories(days)35302520151050POYFDYDTYPSFSource:IHS,J.P.Morgan2018environmentalprotectiontaxmightbenegativeforPETdemandOngoingChineseInChina,waterjetweavingandprinting/dyeingarelargedemandoutletsforenvironmentalclampdownspolyester.Boththeseindustriesaresmallandfragmented,manyoperatedbysmallmightbenegativeforfamily-ownedbusinesseswithlowemphasisonenvironmentalprotection.Thepolyesterdemand.averagewater-jetloomproduces2.5tonnesofwastewaterperday,andwastewaterdischargefromthetextileindustryaccountsfor7.5%ofnationalindustrialwastewaterdischarge.In2018,weseepotentialforenvironmentalclampdownsandthenewenvironmentalprotectiontaxtoresultinthetemporaryorpermanentclosuresofthesedownstreamindustries,resultinginlowerdemandforpolyester.NewenvironmentaltaxlawThenewenvironmentalprotectiontaxcameintoeffecton1January2018,andthemighthavealargenegativefirstroundoftaxcollectionwillbeon1April2018.Weestimatethataimpactoncashflowofprinting/dyeingcompanywithRMB50mnperannumoftextilesaleswillhavetopaysmall/medium-sizedweavingRMB300-700Kperannumintaxunderthenewlaw.Thismightbeenoughtoflipandprinting/dyeingsomeSMEsintoloss-makingterritory.In2016,large-scaleprinting/dyeingcompanies.companieshadanaverageOPMof5.33%.IfweassumesmallenterpriseshadaslightlyworseOPMof3%,thenewenvironmentaltaxcouldpotentiallyrepresent20-47%ofOPforanSME.11 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comLocalgovernmentscontinueInaddition,localgovernmentscontinuetoputpressureoncompaniestomeettheirtoputpressureoncompaniesenvironmentaltargets.Recently,KunshancityinJiangsuprovincereleasedanurgenttomeetenvironmentalnoticewhichrequired270enterprisesincluding17textilemillstoshutdowntargets.completely,inordertomakethewaterqualityofnationalandprovincialcrosssectionsmeetnationalannualassessmentstandards.NewvirginPETsupplycomingonline,whileofflinecapacitiesarerestartedInChina,Xianglupetchemhasrestarted2/4productionlines.Twolinestotalling3Mtpaofcapacityhavebeenrunningat70-80%utilization,withplannedmaintenanceinMarchpostponedtoMay.Theremainingtwolinestotalling3.15Mtpacapacityremainshut.Inadditiontotheabove,posttheM&Gbankruptcy,IHSbelievesthatthesaleoftheidledAppleGrovePETfacilitymightbecompletedbyend1Q18,withpossiblerestartinmid-2018.Meanwhile,theAltamiraPETfacilityhasresumedproductionsinceNovemberundertollingagreement.Figure18:Globalpolyestercapacityadditions(ktpay/y)8,0007,0006,0005,0004,0003,0002,0001,000-(1,000)(2,000)IndiaMidEastNAmericaNortheastAsiaLatamWEuropeROWSource:IHS,J.P.Morgan#2:PTA–marginstrengthfromPETdemand,butlimitedfurtherupsideAlmostallglobalPTAproductionisusedtomakepolyester.ThePTAindustryhasbeenoversuppliedsince2012duetoawaveofChinesecapacityadditionsin2012-16.However,aspateoflargeforcemajeure,outagesandbankruptciesinlate2016andearly2017helpedbalancethemarket.ThisincludedPKNOrlen’s600ktpaPTAplantinOctober2016,BP’s1.4MtpaplantinBelgiuminFebruary2017andaprolongedshutdownatXianglupetchemfollowingDragonAromatic’sblast(recentlyrestarted).Spreadshaveincreasedto$120/t–thehighestsincemid-2015,andweseelimitedfurtherupsideashighfeedstockcostshavestartedtoeatintopolyestermargins.12 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comFigure19:PTAspread($/tonne)14012010080604020PTASpreadSource:Bloomberg,J.P.MorganFigure20:GlobalPTAcapacityadditions(Mtpay/y)1220%10815%610%425%0-20%20072008200920102011201220132,0142015201620172018eNAmericaWEuropeNAsia(ex-China)ChinaSAsiaMEGrowthrate(RHS)demandgrowth(RHS)Source:IHS,J.P.Morgan#3:MEG–spreadstoaverage$200/tin1H?Approximately84%ofglobalMEGproductionisusedtomakepolyester,whiletheremaining16%isusedtomakeantifreezeandotherindustrialproducts.InChina,MEGisproducedviatwoprimaryroutes–thetraditionalethylene-basedroute,andthecoal-basedroute.MostofChina’snewcapacityexpansionprojectsareviathecoal-basedroute,asnon-integratedethylene-basedMEGproductioninChinahasbeenloss-makingforyears.In1H18,MEGspreadsralliedtothehighestinrecentyearsduetostrengthinthepolyestermarket.Weexpectspreadstoremainrobustin1H18duetopeaksummerdemandandhighmaintenancein2Q,withChineseMEGinventoriesdrawingdownthroughJuly.13 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comFigure21:MEGspread($/tonne)350300250200150100500-50-100MEGspreadSource:Bloomberg,J.P.MorganFigure22:GlobalMEGcapacityadditions(Mtpay/y)4$6003$500s$400no2tno$300liil1m$2000$100-1$012345678901234567ee00000000011111111890000000000000000011222222222222222220022MEGdemandgrowthMEGcapacitygrowthSpread(RHS)Source:IHS,J.P.MorganFigure23:ChinaMEGinventory(kt)850800750700650600550500450400JanFebMarAprMayJunJulAugSepOctNovDec2015201620172018Source:IHS,J.P.Morgan14 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.com#4:PX–NghiSonplantstart-upmightpressurespreadsApproximately97%ofglobalPXdemandcomesfromPTA,whichisinturnusedtomakepolyester.AccordingtoICISnews,the600ktpaNghiSonrefinery’sPXunitinVietnamisundergoingtestrunsandwillstartcommercialPXproductioninMay2018.WeexpectPXspreadstotradeinthe$300-400/trangein2018.Figure24:PX-naphthaspread($/tonne)450430410390370350330310290270250PX-NapSpreadSource:Bloomberg,J.P.MorganFigure25:GlobalPXcapacityadditions(Ktpay/y)5,00011%4,00010%9%3,0008%2,0007%1,0006%5%----4%(1,000)3%(2,000)2%2009201020112012201320142015201620172018eNAmericaSAmericaWEuropeNAsia(ex-China)ChinaSAsiaMEOthers%y/y(RHS)Source:IHS,J.P.Morgan15 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comConclusionIn1H18,weexpectthepolyesterchaintoremainsupportedbyresumptioninChinesebottle/textileproductionpostCNYasdemandpeaksseasonallyaroundJune/July.Additionalsupportmightalsocomefromregionalplantbankruptcies/outages,ADDsandtheimpactofthewasteplasticimportban,whichsaw2017wastePETimportsof~2.2MtfalltoalmostzeroinJanuary.However,in2H18,therestart/ramp-upoflong-idledvirginPETcapacity(Xianglu,M&G,JBF)andcommissioningofnewcapacitycouldpressurespreads.Inaddition,China’senvironmentalclampdownandimpositionofnewenvironmentaltax(firstcollectionon1April2018)mightnegativelyaffectChina’sdownstreampolyesterindustries(waterjetloomandprinting/dyeing),resultinginweakerpolyesterdemandgrowth.Coupledwiththestart-upofex-ChinaPETrecyclingcapacityin2H18,weseepotentialforcurrentmarginstrengthtofadein2H18.RegionalpetchemcompsTable1:RegionalRefiningandPetrochemicalValuationsCompanyRatingPricePTMktCapPE(x)PB(x)ROE(%)Yield(%)(LC)(LC)USDmilFY18eFY19eFY18eFY19eFY18eFY19eFY18eFY19eFPCCN11311636,55516.216.33.13.119.6%19%4.9%4.6%FormosaPlasticsOW10111521,82213.412.61.81.813.4%14%5.5%5.6%FCFCOW10512520,89212.812.81.71.713.2%13%5.6%5.7%LGChemOW38050048000024,82911.411.01.51.313.8%13%1.8%1.8%LotteChemOW47100049000014,9236.37.01.11.019.3%15%1.3%1.3%HanwhaChemicalOW32100380004,8835.45.70.70.613.3%11%1.1%1.1%KPICOW3150003800001,8905.65.01.00.922.9%21%1.9%1.9%KumhoPetchemN893001150002,51510.612.71.41.413.7%11%1.1%1.1%SKInnovationOW20800024400017,7367.87.50.90.912.6%12%3.8%3.8%S-OilN12600012500013,11312.19.41.91.817.1%21%4.9%6.4%PTTGCN1009514,25210.911.61.51.514.7%13%4.3%4.3%SiamCementN48650018,52711.711.52.01.818.2%17%3.9%3.9%IndoramaVenturesOW54659,19813.914.22.12.216.5%15%2.9%2.8%ThaiOilN1011006,5469.910.71.51.416.1%14%4.8%4.9%LotteTitanOW673,34910.310.31.11.010.8%10%3.8%3.8%PetronasChemicalsN8.18.216,54715.017.22.12.014.3%12%3.2%3.2%RILN94894092,09517.715.42.11.912.5%13%0.6%0.7%ShanghaiPetchemOW4.75.28,8507.712.21.41.318.3%11%5.8%3.7%SinopecCorpOW6.28.4115,7507.57.10.80.710.7%11%7.4%7.0%ChinaBlueChemOW2.33.61,37814.614.60.60.64.3%4%3.2%3.7%Source:Bloomberg.J.P.Morganestimates.Note:Pricedasof28Feb2018.NCcompanies’forecastsarebasedonBloombergconsensusestimates.RILMarchyear-end.16 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comTable2:RefiningmarginandchemicalspreadforecastforAsia,US$/tonSpreads200720082009201020112012201320142015201620172018e2019e2020eEthylene$451$336$275$357$222$254$331$503$576$669$654$600$600$600Propylene$398$394$352$452$467$363$419$417$296$312$382$380$450$500Butadiene$376$1,242$457$1,189$2,049$1,479$552$449$411$744$990$700$750$800Benzene$342$166$138$189$166$267$381$351$198$238$320$350$350$350Styrene$184$156$172$157$183$156$295$137$213$217$239$225$225$225MEG$428$233$135$237$486$309$302$111$143$22$163$150$150$150PX$454$356$435$318$605$553$559$347$332$371$356$360$400$400PTA$110$116$170$270$234$98$82$79$78$81$81$80$80$80PTA-Naphtha$565$472$605$588$839$651$641$426$410$452$437$440$480$480LDPE$264$410$323$345$354$86$223$140$136$80$36$50$50$50LLDPE$192$341$321$201$145$103$202$134$127$60-$15$50$50$50HDPE$181$290$325$134$183$150$212$160$147$59$9$50$50$50PE-Naphtha$663$683$598$583$450$367$544$648$713$746$664$650$650$650PVC$371$451$388$447$483$372$381$331$293$294$323$390$400$400PP$231$243$168$141$116$92$135$203$302$256$188$180$180$180PP-Naphtha$629$636$519$593$583$455$554$620$598$568$570$560$630$680PS$103$131$97$112$116$120$152$160$159$154$138$160$160$160ABS$212$182$263$251$50$105$192$252$287$211$362$400$330$330SBR$1,146$1,553$958$1,269$1,676$1,059$544$512$355$400$592$700$750$800PET$149$194$121$138$157$124$126$134$116$113$117$130$130$130AsiaGRM($/bbl)$6.9$8.3$2.3$4.0$7.4$7.1$6.3$5.8$6.7$5.0$6.2$6.0$6.0$6.0Ureaspotprice$324$551$280$318$451$445$364$357$295$212$239$250$250$250Methanolspotprice$338$374$236$298$365$373$399$372$270$240$323$270$250$250Source:IHSChemical,J.P.Morganestimates.Table3:EstimatedrevenueexposurebypetrochemicalproducttypesRefiningOlefinsAromaticsMEGPEPPPVC/CAPS/ABSSBRPETSpecialtyOthersFPCC66%27%7%FPC17%17%23%16%16%11%FCFC36%5%16%7%36%NPC24%16%20%40%TSRC97%3%LGC9%3%1%8%3%10%25%10%11%20%Lotte17%12%10%25%18%2%8%3%5%Hanwha16%23%5%56%SKInno81%1%13%3%2%S-Oil89%11%0%KPIC12%29%34%24%1%Kumho24%25%38%3%10%PTTGC42%10%7%2%12%1%11%15%SCC13%4%10%8%12%53%IVL2%29%5%65%0%TOP78%16%6%PCG14%10%8%17%10%41%RIL66%6%1%4%1%12%10%SPC50%10%4%4%3%7%22%Source:Companydata,J.P.Morgan.17 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comPetrochemicalssharepriceperformancesFigure26:YTDABSOLUTEsharepriceperformanceFigure27:YTDRELATIVEtoCountryIndexsharepriceperformanceLotte25%Lotte26%KPIC19%KPIC20%TTNP18%TTNP14%PTTGC17%PTTGC12%Sinopec8%Hanwha7%PCG5%Sinopec2%Hanwha5%FPC2%SPC5%PCG2%FPC3%FCFC2%FCFC3%NPC0%NPC2%SPC-1%IVL1%FPCC-2%SCC1%IVL-3%FPCC-1%SCC-3%CBC-4%LGC-4%LGC-5%Kumho-7%Kumho-9%CBC-9%-15%-10%-5%0%5%10%15%20%25%30%-15%-10%-5%0%5%10%15%20%25%30%Source:Bloomberg.Pricedas28Feb2018Source:Bloomberg.Pricedas28Feb2018Figure28:1MABSOLUTEsharepriceperformanceFigure29:1MRELATIVEtoCountryIndexsharepriceperformanceLotte10%Lotte15%TTNP3%SPC4%PTTGC2%TTNP4%PCG0%PTTGC2%SCC0%FPC2%FPC-1%NPC0%NPC-2%PCG0%SPC-3%FCFC-1%FCFC-3%SCC-1%IVL-4%KPIC-1%KPIC-6%Hanwha-1%Hanwha-6%Sinopec-2%FPCC-8%IVL-4%Sinopec-10%Kumho-5%Kumho-10%FPCC-5%LGC-12%LGC-7%CBC-19%CBC-11%-25%-20%-15%-10%-5%0%5%10%15%-15%-10%-5%0%5%10%15%20%Source:Bloomberg.Pricedas28Feb2018Source:Bloomberg.Pricedas28Feb2018Figure30:3MABSOLUTEsharepriceperformanceFigure31:3MRELATIVEtoCountryIndexsharepriceperformanceLotte28%Lotte30%KPIC27%KPIC29%PTTGC25%PTTGC18%Hanwha15%Hanwha17%FCFC12%FCFC11%Sinopec12%FPC8%IVL10%FPCC4%FPC10%Sinopec4%PCG10%NPC4%CBC8%IVL3%FPCC6%Kumho2%NPC5%PCG1%CBC0%SCC4%TTNP0%SPC3%SCC-4%TTNP0%LGC-5%Kumho0%SPC-5%LGC-7%-10%-5%0%5%10%15%20%25%30%35%-10%-5%0%5%10%15%20%25%30%Source:Bloomberg.Pricedas28Feb2018Source:Bloomberg.Pricedas28Feb201818 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comRefiningsharepriceperformancesFigure32:YTDABSOLUTEsharepriceperformanceFigure33:YTDRELATIVEtoCountryIndexsharepriceperformancePTTGC17%PTTGC12%Sinopec9%S-Oil7%S-Oil6%Sinopec6%SPC5%RIL4%RIL5%SKInno2%SKInno0%SPC2%TOP0%FPCC-2%FPCC-1%IOCL-4%IOCL-3%TOP-5%HPCL-8%HPCL-9%-10%-5%0%5%10%15%20%-15%-10%-5%0%5%10%15%Source:Bloomberg.Pricedas28Feb2018Source:Bloomberg.Pricedas28Feb2018Figure34:1MABSOLUTEsharepriceperformanceFigure35:1MRELATIVEtoCountryIndexsharepriceperformancePTTGC2%SKInno3%RIL0%SPC2%TOP0%S-Oil-2%PTTGC2%SKInno-2%HPCL2%SPC-3%TOP-1%HPCL-4%Sinopec-3%FPCC-8%Sinopec-9%IOCL-4%IOCL-9%FPCC-5%-10%-5%0%5%-6%-4%-2%0%2%4%Source:Bloomberg.Pricedas28Feb2018Source:Bloomberg.Pricedas28Feb2018Figure36:3MABSOLUTEsharepriceperformanceFigure37:3MRELATIVEtoCountryIndexsharepriceperformancePTTGC25%PTTGC18%Sinopec14%Sinopec7%TOP10%S-Oil6%FPCC6%FPCC4%RIL5%SKInno3%S-Oil4%TOP2%SPC3%RIL0%SKInno1%SPC-3%IOCL-2%IOCL-6%HPCL-7%HPCL-11%-10%-5%0%5%10%15%20%25%30%-15%-10%-5%0%5%10%15%20%Source:Bloomberg.Pricedas28Feb2018Source:Bloomberg.Pricedas28Feb201819 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comOlefinsChainspreads($/t)Figure38:WeeklyEthylene/PropylenespreadsFigure39:WeeklyCrackerspreads9001,4008001,2007006001,00050040080030060020010040007788990011223344556200-0n0l--0n0l--0n0l--1n1l--1n1l--1n1l--1n1l--1n1l--1n1l--1naJuJaJuJaJuJaJuJaJuJaJuJaJuJaJuJaJuJaJCrackerEthylenespreadPropylenespreadSource:Bloomberg.Source:Bloomberg.Figure40:WeeklyPEspreadsFigure41:WeeklyPE-Naphthaspreads8009007006008005007004003006002001005000(100)400(200)300200LDPEspreadHDPEspreadLLDPEspreadSource:Bloomberg.Source:Bloomberg.Figure42:WeeklyPPspreadsFigure43:WeeklyPVCspreads7007006006005005004003004002003001002000(100)100(200)0Source:Bloomberg.Source:Bloomberg.20 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comPolyesterChainspreads($/tonne)Figure44:WeeklyPXspreadsFigure45:WeeklyPTAspreads8004507004006003503005002504002003001502001001005000Source:Bloomberg,IHSChemical.Source:Bloomberg,IHSChemical.Figure46:WeeklyPTA-NaphthaspreadsFigure47:WeeklyMEGspreads1,2001,0001,1009001,0008007009006008005007004003006002005001004000300(100)(200)200Source:Bloomberg,IHSChemical.Source:Bloomberg.21 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comBDChainspreads($/tonne)Figure48:MonthlyBD-NaphthaspreadsFigure49:MonthlyBD-C4spreads3,0003,0002,5002,5002,0002,0001,5001,5001,0001,0005005000077889901122344556677788990112234455667-0n-0g0r-0t--0y-0c1l--1b-1p1r--1v-1n-1n-1g1r-1t--1y-1c1l--0n-0g0r-0t--0y-0c1l--1b-1p1r--1v-1n-1n-1g1r-1t--1y-1c1l-aJuaMcOaeuJeFepAouJaJuaMcOaeuJaJuaMcOaeuJeFepAouJaJuaMcOaeuJAMDSNAMDAMDSNAMDSource:IHSChemical.Source:Bloomberg.Figure50:MonthlySBRspreadsFigure51:MonthlyABSspreads2,5006005002,0004003001,5002001001,0000500(100)(200)0(300)77889901122344556677788990112234455667-0n-0g0r-0t--0y-0c1l--1b-1p1r--1v-1n-1n-1g1r-1t--1y-1c1l--0n-0g0r-0t--0y-0c1l--1b-1p1r--1v-1n-1n-1g1r-1t--1y-1c1l-aJuaMcOaeuJeFepAouJaJuaMcOaeuJaJuaMcOaeuJeFepAouJaJuaMcOaeuJAMDSNAMDAMDSNAMDSource:IHSChemical.Source:IHSChemical.22 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comCompaniesDiscussedinThisReport(allpricesinthisreportasofmarketcloseon02March2018,unlessotherwiseindicated)IndoramaVentures(IVL.BK/Bt53.00/Overweight),NanYaPlasticsCorp(1303.TW/NT$78.30/Neutral),RelianceIndustriesLtd(RELI.BO/Rs948.40[01March2018]/Neutral),S-OilCorp(010950.KS/W126000/Neutral)AnalystCertification:Theresearchanalyst(s)denotedbyan“AC”onthecoverofthisreportcertifies(or,wheremultipleresearchanalystsareprimarilyresponsibleforthisreport,theresearchanalystdenotedbyan“AC”onthecoverorwithinthedocumentindividuallycertifies,withrespecttoeachsecurityorissuerthattheresearchanalystcoversinthisresearch)that:(1)alloftheviewsexpressedinthisreportaccuratelyreflecthisorherpersonalviewsaboutanyandallofthesubjectsecuritiesorissuers;and(2)nopartofanyoftheresearchanalyst"scompensationwas,is,orwillbedirectlyorindirectlyrelatedtothespecificrecommendationsorviewsexpressedbytheresearchanalyst(s)inthisreport.ForallKorea-basedresearchanalystslistedonthefrontcover,theyalsocertify,asperKOFIArequirements,thattheiranalysiswasmadeingoodfaithandthattheviewsreflecttheirownopinion,withoutundueinfluenceorintervention.ImportantDisclosuresMarketMaker/LiquidityProvider:J.P.MorganSecuritiesplcand/oranaffiliateisamarketmakerand/orliquidityproviderinsecuritiesissuedbyNanYaPlasticsCorp,IndoramaVentures,RelianceIndustriesLtd,S-OilCorp.LeadorCo-manager:J.P.Morganactedasleadorco-managerinapublicofferingofequityand/ordebtsecuritiesforRelianceIndustriesLtdwithinthepast12months.Client:J.P.Morgancurrentlyhas,orhadwithinthepast12months,thefollowingentity(ies)asclients:NanYaPlasticsCorp,RelianceIndustriesLtd,S-OilCorp.Client/InvestmentBanking:J.P.Morgancurrentlyhas,orhadwithinthepast12months,thefollowingentity(ies)asinvestmentbankingclients:RelianceIndustriesLtd.Client/Non-InvestmentBanking,Securities-Related:J.P.Morgancurrentlyhas,orhadwithinthepast12months,thefollowingentity(ies)asclients,andtheservicesprovidedwerenon-investment-banking,securities-related:NanYaPlasticsCorp,RelianceIndustriesLtd,S-OilCorp.Client/Non-Securities-Related:J.P.Morgancurrentlyhas,orhadwithinthepast12months,thefollowingentity(ies)asclients,andtheservicesprovidedwerenon-securities-related:RelianceIndustriesLtd,S-OilCorp.InvestmentBanking(past12months):J.P.Morganreceivedinthepast12monthscompensationforinvestmentbankingservicesfromRelianceIndustriesLtd.InvestmentBanking(next3months):J.P.Morganexpectstoreceive,orintendstoseek,compensationforinvestmentbankingservicesinthenextthreemonthsfromRelianceIndustriesLtd.Non-InvestmentBankingCompensation:J.P.Morganhasreceivedcompensationinthepast12monthsforproductsorservicesotherthaninvestmentbankingfromNanYaPlasticsCorp,RelianceIndustriesLtd,S-OilCorp.OtherSignificantFinancialInterests:J.P.Morganownsapositionof1millionUSDormoreinthedebtsecuritiesofNanYaPlasticsCorp,IndoramaVentures,RelianceIndustriesLtd,S-OilCorp.DebtPosition:J.P.MorganmayownapositioninthedebtsecuritiesofRelianceIndustriesLtd.Company-SpecificDisclosures:Importantdisclosures,includingpricechartsandcreditopinionhistorytables,areavailableforcompendiumreportsandallJ.P.Morgan–coveredcompaniesbyvisitinghttps://www.jpmm.com/research/disclosures,calling1-800-477-0406,ore-mailingresearch.disclosure.inquiries@jpmorgan.comwithyourrequest.J.P.Morgan’sStrategy,Technical,andQuantitativeResearchteamsmayscreencompaniesnotcoveredbyJ.P.Morgan.Forimportantdisclosuresforthesecompanies,pleasecall1-800-477-0406ore-mailresearch.disclosure.inquiries@jpmorgan.com.23 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comNanYaPlasticsCorp(1303.TW,1303TT)PriceChart12610890NNT$63NNT$68NNT$76NNT$90DateRatingSharePricePriceTarget(NT$)(NT$)Price(NT$)7223-May-16N59.2063.005403-Nov-16N64.5068.0022-Jun-17N72.5076.003611-Jan-18N82.7090.00180MarJunSepDecMarJunSepDecMarJunSepDecMar15151515161616161717171718Source:BloombergandJ.P.Morgan;pricedataadjustedforstocksplitsanddividends.InitiatedcoverageOct02,2001.IndoramaVentures(IVL.BK,IVLTB)PriceChart102OWBt6585OWBt6368NRNBt35NBt39DateRatingSharePricePriceTarget(Bt)(Bt)Price(Bt)5101-Apr-16NR22.80--25-Nov-16N33.5035.003414-Aug-17N37.2539.0010-Nov-17OW48.5063.0013-Feb-18OW53.0065.00170MarJunSepDecMarJunSepDecMarJunSepDecMar15151515161616161717171718Source:BloombergandJ.P.Morgan;pricedataadjustedforstocksplitsanddividends.InitiatedcoverageMar29,2010.24 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comRelianceIndustriesLtd(RELI.BO,RILIN)PriceChart1,519NRs730DateRatingSharePricePriceTarget(Rs)(Rs)1,302NRs515NRs535NRs655NRs94019-Apr-15N442.82460.001,085NRs460NRs500NRs520NRs542.5NRs620NRs82016-Nov-15N466.52500.0020-Jan-16N521.80515.00Price(Rs)86825-May-16N470.23520.0017-Jul-16N506.10535.0065125-Nov-16N496.85542.5043412-Mar-17N640.83620.0025-Apr-17N708.70655.0021723-Jul-17N792.50730.0015-Oct-17N876.80820.00021-Jan-18N931.30940.00MarJunSepDecMarJunSepDecMarJunSepDecMar15151515161616161717171718Source:BloombergandJ.P.Morgan;pricedataadjustedforstocksplitsanddividends.InitiatedcoverageMar14,2000.S-OilCorp(010950.KS,010950KS)PriceChart201,348172,584NW90,000NW125,000DateRatingSharePricePriceTarget(W)(W)143,820NW64,000NW70,000NW80,000NW85,000NW100,000NW105,000NW115,00027-Apr-15N745006400002-Oct-15N6330070000Price(W)115,05612-Jan-16N787008000023-May-16N829008500086,29211-Oct-16N8050010000057,52803-Nov-16N810009000003-Apr-17N9960010500028,76404-Sep-17N12450011500016-Oct-17N1315001250000MarJunSepDecMarJunSepDecMarJunSepDecMar15151515161616161717171718Source:BloombergandJ.P.Morgan;pricedataadjustedforstocksplitsanddividends.InitiatedcoverageJul31,2002.Thechart(s)showJ.P.Morgan"scontinuingcoverageofthestocks;thecurrentanalystsmayormaynothavecovereditovertheentireperiod.J.P.Morganratingsordesignations:OW=Overweight,N=Neutral,UW=Underweight,NR=NotRatedExplanationofEquityResearchRatings,DesignationsandAnalyst(s)CoverageUniverse:J.P.Morganusesthefollowingratingsystem:Overweight[Overthenextsixtotwelvemonths,weexpectthisstockwilloutperformtheaveragetotalreturnofthestocksintheanalyst’s(ortheanalyst’steam’s)coverageuniverse.]Neutral[Overthenextsixtotwelvemonths,weexpectthisstockwillperforminlinewiththeaveragetotalreturnofthestocksintheanalyst’s(ortheanalyst’steam’s)coverageuniverse.]Underweight[Overthenextsixtotwelvemonths,weexpectthisstockwillunderperformtheaveragetotalreturnofthestocksintheanalyst’s(ortheanalyst’steam’s)coverageuniverse.]NotRated(NR):J.P.Morganhasremovedtheratingand,ifapplicable,thepricetarget,forthisstockbecauseofeitheralackofasufficientfundamentalbasisorforlegal,regulatoryorpolicyreasons.Thepreviousratingand,ifapplicable,thepricetarget,nolongershouldbereliedupon.AnNRdesignationisnotarecommendationorarating.InourAsia(ex-Australiaandex-India)andU.K.small-andmid-capequityresearch,eachstock’sexpectedtotalreturniscomparedtotheexpectedtotalreturnofabenchmarkcountrymarketindex,nottothoseanalysts’coverageuniverse.IfitdoesnotappearintheImportantDisclosuressectionofthisreport,thecertifyinganalyst’scoverageuniversecanbefoundonJ.P.Morgan’sresearchwebsite,www.jpmorganmarkets.com.25 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comCoverageUniverse:Ong,ParsleyRuiHua:HanwhaChemicalCorp(009830.KS),KoreaPetrochemical(006650.KS),KumhoPetrochemical(011780.KS),LGChemLtd(051910.KS),LotteChemicalCorp(011170.KS),S-OilCorp(010950.KS),SKInnovationCoLtd(096770.KS)J.P.MorganEquityResearchRatingsDistribution,asofJanuary02,2018OverweightNeutralUnderweight(buy)(hold)(sell)J.P.MorganGlobalEquityResearchCoverage45%43%12%IBclients*53%50%35%JPMSEquityResearchCoverage44%46%10%IBclients*70%66%54%*Percentageofinvestmentbankingclientsineachratingcategory.ForpurposesonlyofFINRA/NYSEratingsdistributionrules,ourOverweightratingfallsintoabuyratingcategory;ourNeutralratingfallsintoaholdratingcategory;andourUnderweightratingfallsintoasellratingcategory.PleasenotethatstockswithanNRdesignationarenotincludedinthetableabove.EquityValuationandRisks:Forvaluationmethodologyandrisksassociatedwithcoveredcompaniesorpricetargetsforcoveredcompanies,pleaseseethemostrecentcompany-specificresearchreportathttp://www.jpmorganmarkets.com,contacttheprimaryanalystoryourJ.P.Morganrepresentative,oremailresearch.disclosure.inquiries@jpmorgan.com.Formaterialinformationabouttheproprietarymodelsused,pleaseseetheSummaryofFinancialsincompany-specificresearchreportsandtheCompanyTearsheets,whichareavailabletodownloadonthecompanypagesofourclientwebsite,http://www.jpmorganmarkets.com.Thisreportalsosetsoutwithinitthematerialunderlyingassumptionsused.EquityAnalysts"Compensation:Theequityresearchanalystsresponsibleforthepreparationofthisreportreceivecompensationbaseduponvariousfactors,includingthequalityandaccuracyofresearch,clientfeedback,competitivefactors,andoverallfirmrevenues.Registrationofnon-USAnalysts:Unlessotherwisenoted,thenon-USanalystslistedonthefrontofthisreportareemployeesofnon-USaffiliatesofJPMS,arenotregistered/qualifiedasresearchanalystsunderNASD/NYSErules,maynotbeassociatedpersonsofJPMS,andmaynotbesubjecttoFINRARule2241restrictionsoncommunicationswithcoveredcompanies,publicappearances,andtradingsecuritiesheldbyaresearchanalystaccount.OtherDisclosuresJ.P.Morgan("JPM")istheglobalbrandnameforJ.P.MorganSecuritiesLLC("JPMS")anditsaffiliatesworldwide.J.P.MorganCazenoveisamarketingnamefortheU.K.investmentbankingbusinessesandEMEAcashequitiesandequityresearchbusinessesofJPMorganChase&Co.anditssubsidiaries.Allresearchreportsmadeavailabletoclientsaresimultaneouslyavailableonourclientwebsite,J.P.MorganMarkets.Notallresearchcontentisredistributed,e-mailedormadeavailabletothird-partyaggregators.Forallresearchreportsavailableonaparticularstock,pleasecontactyoursalesrepresentative.Optionsrelatedresearch:Iftheinformationcontainedhereinregardsoptionsrelatedresearch,suchinformationisavailableonlytopersonswhohavereceivedtheproperoptionriskdisclosuredocuments.ForacopyoftheOptionClearingCorporation"sCharacteristicsandRisksofStandardizedOptions,pleasecontactyourJ.P.MorganRepresentativeorvisittheOCC"swebsiteathttps://www.theocc.com/components/docs/riskstoc.pdfLegalEntitiesDisclosuresU.S.:JPMSisamemberofNYSE,FINRA,SIPCandtheNFA.JPMorganChaseBank,N.A.isamemberofFDIC.U.K.:JPMorganChaseN.A.,LondonBranch,isauthorisedbythePrudentialRegulationAuthorityandissubjecttoregulationbytheFinancialConductAuthorityandtolimitedregulationbythePrudentialRegulationAuthority.DetailsabouttheextentofourregulationbythePrudentialRegulationAuthorityareavailablefromJ.P.Morganonrequest.J.P.MorganSecuritiesplc(JPMSplc)isamemberoftheLondonStockExchangeandisauthorisedbythePrudentialRegulationAuthorityandregulatedbytheFinancialConductAuthorityandthePrudentialRegulationAuthority.RegisteredinEngland&WalesNo.2711006.RegisteredOffice25BankStreet,London,E145JP.SouthAfrica:J.P.MorganEquitiesSouthAfricaProprietaryLimitedisamemberoftheJohannesburgSecuritiesExchangeandisregulatedbytheFinancialServicesBoard.HongKong:J.P.MorganSecurities(AsiaPacific)Limited(CEnumberAAJ321)isregulatedbytheHongKongMonetaryAuthorityandtheSecuritiesandFuturesCommissioninHongKongand/orJ.P.MorganBroking(HongKong)Limited(CEnumberAAB027)isregulatedbytheSecuritiesandFuturesCommissioninHongKong.Korea:ThismaterialisissuedanddistributedinKoreabyorthroughJ.P.MorganSecurities(FarEast)Limited,SeoulBranch,whichisamemberoftheKoreaExchange(KRX)andisregulatedbytheFinancialServicesCommission(FSC)andtheFinancialSupervisoryService(FSS).Australia:J.P.MorganAustraliaLimited(JPMAL)(ABN52002888011/AFSLicenceNo:238188)isregulatedbyASICandJ.P.MorganSecuritiesAustraliaLimited(JPMSAL)(ABN61003245234/AFSLicenceNo:238066)isregulatedbyASICandisaMarket,ClearingandSettlementParticipantofASXLimitedandCHI-X.Taiwan:J.P.MorganSecurities(Taiwan)LimitedisaparticipantoftheTaiwanStockExchange(company-type)andregulatedbytheTaiwanSecuritiesandFuturesBureau.India:J.P.MorganIndiaPrivateLimited(CorporateIdentityNumber-U67120MH1992FTC068724),havingitsregisteredofficeatJ.P.MorganTower,Off.C.S.T.Road,Kalina,Santacruz-East,Mumbai–400098,isregisteredwithSecuritiesandExchangeBoardofIndia(SEBI)asa‘ResearchAnalyst’havingregistrationnumberINH000001873.J.P.MorganIndiaPrivateLimitedisalsoregisteredwithSEBIasamemberoftheNationalStockExchangeofIndiaLimited(SEBIRegistrationNumber-INB230675231/INF230675231/INE230675231),theBombayStockExchangeLimited(SEBIRegistrationNumber-INB010675237/INF010675237)andasaMerchantBanker(SEBIRegistrationNumber-MB/INM000002970).Telephone:91-22-61573000,Facsimile:91-22-61573990andWebsite:www.jpmipl.com.Fornonlocalresearchreports,thismaterialisnotdistributedinIndiabyJ.P.MorganIndiaPrivateLimited.26 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comThailand:ThismaterialisissuedanddistributedinThailandbyJPMorganSecurities(Thailand)Ltd.,whichisamemberoftheStockExchangeofThailandandisregulatedbytheMinistryofFinanceandtheSecuritiesandExchangeCommissionanditsregisteredaddressis3rdFloor,20NorthSathornRoad,Silom,Bangrak,Bangkok10500.Indonesia:PTJ.P.MorganSecuritiesIndonesiaisamemberoftheIndonesiaStockExchangeandisregulatedbytheOJKa.k.a.BAPEPAMLK.Philippines:J.P.MorganSecuritiesPhilippinesInc.isaTradingParticipantofthePhilippineStockExchangeandamemberoftheSecuritiesClearingCorporationofthePhilippinesandtheSecuritiesInvestorProtectionFund.ItisregulatedbytheSecuritiesandExchangeCommission.Brazil:BancoJ.P.MorganS.A.isregulatedbytheComissaodeValoresMobiliarios(CVM)andbytheCentralBankofBrazil.Mexico:J.P.MorganCasadeBolsa,S.A.deC.V.,J.P.MorganGrupoFinancieroisamemberoftheMexicanStockExchangeandauthorizedtoactasabrokerdealerbytheNationalBankingandSecuritiesExchangeCommission.Singapore:ThismaterialisissuedanddistributedinSingaporebyorthroughJ.P.MorganSecuritiesSingaporePrivateLimited(JPMSS)[MCI(P)202/03/2017andCo.Reg.No.:199405335R],whichisamemberoftheSingaporeExchangeSecuritiesTradingLimitedand/orJPMorganChaseBank,N.A.,Singaporebranch(JPMCBSingapore)[MCI(P)059/09/2017],bothofwhichareregulatedbytheMonetaryAuthorityofSingapore.ThismaterialisissuedanddistributedinSingaporeonlytoaccreditedinvestors,expertinvestorsandinstitutionalinvestors,asdefinedinSection4AoftheSecuritiesandFuturesAct,Cap.289(SFA).Thismaterialisnotintendedtobeissuedordistributedtoanyretailinvestorsoranyotherinvestorsthatdonotfallintotheclassesof“accreditedinvestors,”“expertinvestors”or“institutionalinvestors,”asdefinedunderSection4AoftheSFA.RecipientsofthisdocumentaretocontactJPMSSorJPMCBSingaporeinrespectofanymattersarisingfrom,orinconnectionwith,thedocument.Japan:JPMorganSecuritiesJapanCo.,Ltd.andJPMorganChaseBank,N.A.,TokyoBranchareregulatedbytheFinancialServicesAgencyinJapan.Malaysia:ThismaterialisissuedanddistributedinMalaysiabyJPMorganSecurities(Malaysia)SdnBhd(18146-X)whichisaParticipatingOrganizationofBursaMalaysiaBerhadandaholderofCapitalMarketsServicesLicenseissuedbytheSecuritiesCommissioninMalaysia.Pakistan:J.P.MorganPakistanBroking(Pvt.)LtdisamemberoftheKarachiStockExchangeandregulatedbytheSecuritiesandExchangeCommissionofPakistan.SaudiArabia:J.P.MorganSaudiArabiaLtd.isauthorizedbytheCapitalMarketAuthorityoftheKingdomofSaudiArabia(CMA)tocarryoutdealingasanagent,arranging,advisingandcustody,withrespecttosecuritiesbusinessunderlicencenumber35-07079anditsregisteredaddressisat8thFloor,Al-FaisaliyahTower,KingFahadRoad,P.O.Box51907,Riyadh11553,KingdomofSaudiArabia.Dubai:JPMorganChaseBank,N.A.,DubaiBranchisregulatedbytheDubaiFinancialServicesAuthority(DFSA)anditsregisteredaddressisDubaiInternationalFinancialCentre-Building3,Level7,POBox506551,Dubai,UAE.CountryandRegionSpecificDisclosuresU.K.andEuropeanEconomicArea(EEA):Unlessspecifiedtothecontrary,issuedandapprovedfordistributionintheU.K.andtheEEAbyJPMSplc.InvestmentresearchissuedbyJPMSplchasbeenpreparedinaccordancewithJPMSplc"spoliciesformanagingconflictsofinterestarisingasaresultofpublicationanddistributionofinvestmentresearch.ManyEuropeanregulatorsrequireafirmtoestablish,implementandmaintainsuchapolicy.FurtherinformationaboutJ.P.Morgan"sconflictofinterestpolicyandadescriptionoftheeffectiveinternalorganisationsandadministrativearrangementssetupforthepreventionandavoidanceofconflictsofinterestissetoutatthefollowinglinkhttps://www.jpmorgan.com/jpmpdf/1320742677360.pdf.ThisreporthasbeenissuedintheU.K.onlytopersonsofakinddescribedinArticle19(5),38,47and49oftheFinancialServicesandMarketsAct2000(FinancialPromotion)Order2005(allsuchpersonsbeingreferredtoas"relevantpersons").Thisdocumentmustnotbeactedonorreliedonbypersonswhoarenotrelevantpersons.Anyinvestmentorinvestmentactivitytowhichthisdocumentrelatesisonlyavailabletorelevantpersonsandwillbeengagedinonlywithrelevantpersons.InotherEEAcountries,thereporthasbeenissuedtopersonsregardedasprofessionalinvestors(orequivalent)intheirhomejurisdiction.Australia:ThismaterialisissuedanddistributedbyJPMSALinAustraliato"wholesaleclients"only.Thismaterialdoesnottakeintoaccountthespecificinvestmentobjectives,financialsituationorparticularneedsoftherecipient.TherecipientofthismaterialmustnotdistributeittoanythirdpartyoroutsideAustraliawithoutthepriorwrittenconsentofJPMSAL.Forthepurposesofthisparagraphtheterm"wholesaleclient"hasthemeaninggiveninsection761GoftheCorporationsAct2001.Germany:ThismaterialisdistributedinGermanybyJ.P.MorganSecuritiesplc,FrankfurtBranchwhichisregulatedbytheBundesanstaltfürFinanzdienstleistungsaufsicht.HongKong:The1%ownershipdisclosureasofthepreviousmonthendsatisfiestherequirementsunderParagraph16.5(a)oftheHongKongCodeofConductforPersonsLicensedbyorRegisteredwiththeSecuritiesandFuturesCommission.(Forresearchpublishedwithinthefirsttendaysofthemonth,thedisclosuremaybebasedonthemonthenddatafromtwomonthsprior.)J.P.MorganBroking(HongKong)Limitedistheliquidityprovider/marketmakerforderivativewarrants,callablebullbearcontractsandstockoptionslistedontheStockExchangeofHongKongLimited.AnupdatedlistcanbefoundonHKExwebsite:http://www.hkex.com.hk.Korea:ThisreportmayhavebeeneditedorcontributedtofromtimetotimebyaffiliatesofJ.P.MorganSecurities(FarEast)Limited,SeoulBranch.Singapore:Asatthedateofthisreport,JPMSSisadesignatedmarketmakerforcertainstructuredwarrantslistedontheSingaporeExchangewheretheunderlyingsecuritiesmaybethesecuritiesdiscussedinthisreport.Arisingfromitsroleasdesignatedmarketmakerforsuchstructuredwarrants,JPMSSmayconducthedgingactivitiesinrespectofsuchunderlyingsecuritiesandholdorhaveaninterestinsuchunderlyingsecuritiesasaresult.TheupdatedlistofstructuredwarrantsforwhichJPMSSactsasdesignatedmarketmakermaybefoundonthewebsiteoftheSingaporeExchangeLimited:http://www.sgx.com.Inaddition,JPMSSand/oritsaffiliatesmayalsohaveaninterestorholdinginanyofthesecuritiesdiscussedinthisreport–pleaseseetheImportantDisclosuressectionabove.Forsecuritieswheretheholdingis1%orgreater,theholdingmaybefoundintheImportantDisclosuressectionabove.Forallothersecuritiesmentionedinthisreport,JPMSSand/oritsaffiliatesmayhaveaholdingoflessthan1%insuchsecuritiesandmaytradetheminwaysdifferentfromthosediscussedinthisreport.EmployeesofJPMSSand/oritsaffiliatesnotinvolvedinthepreparationofthisreportmayhaveinvestmentsinthesecurities(orderivativesofsuchsecurities)mentionedinthisreportandmaytradetheminwaysdifferentfromthosediscussedinthisreport.Taiwan:ThismaterialisissuedanddistributedinTaiwanbyJ.P.MorganSecurities(Taiwan)Limited.AccordingtoParagraph2,Article7-1ofOperationalRegulationsGoverningSecuritiesFirmsRecommendingTradesinSecuritiestoCustomers(asamendedorsupplemented)and/orotherapplicablelawsorregulations,pleasenotethattherecipientofthismaterialisnotpermittedtoengageinanyactivitiesinconnectionwiththematerialwhichmaygiverisetoconflictsofinterests,unlessotherwisedisclosedinthe“ImportantDisclosures”inthismaterial.India:Forprivatecirculationonly,notforsale.Pakistan:Forprivatecirculationonly,notforsale.NewZealand:ThismaterialisissuedanddistributedbyJPMSALinNewZealandonlytopersonswhoseprincipalbusinessistheinvestmentofmoneyorwho,inthecourseofandforthepurposesoftheirbusiness,habituallyinvestmoney.JPMSALdoesnotissueordistributethismaterialtomembersof"thepublic"asdeterminedinaccordancewithsection3oftheSecuritiesAct1978.TherecipientofthismaterialmustnotdistributeittoanythirdpartyoroutsideNewZealandwithoutthepriorwrittenconsentofJPMSAL.Canada:Theinformationcontainedhereinisnot,andundernocircumstancesistobeconstruedas,aprospectus,anadvertisement,apublicoffering,anoffertosellsecuritiesdescribedherein,orsolicitationofanoffertobuysecuritiesdescribedherein,inCanadaoranyprovinceorterritorythereof.AnyofferorsaleofthesecuritiesdescribedhereininCanadawillbemadeonlyunderanexemptionfromtherequirementstofileaprospectuswiththerelevantCanadiansecuritiesregulatorsandonlybyadealerproperlyregisteredunderapplicablesecuritieslawsor,alternatively,pursuanttoanexemptionfromthedealerregistrationrequirementintherelevantprovinceorterritoryofCanadainwhichsuchofferorsaleismade.TheinformationcontainedhereinisundernocircumstancestobeconstruedasinvestmentadviceinanyprovinceorterritoryofCanadaandisnottailoredtotheneedsoftherecipient.Totheextentthattheinformationcontainedhereinreferencessecuritiesofanissuerincorporated,formedorcreatedunderthelawsofCanadaoraprovinceorterritoryof27 ParsleyRuiHuaOngAsiaPacificEquityResearch(852)2800-850905March2018parsley.rh.ong@jpmorgan.comCanada,anytradesinsuchsecuritiesmustbeconductedthroughadealerregisteredinCanada.NosecuritiescommissionorsimilarregulatoryauthorityinCanadahasreviewedorinanywaypassedjudgmentuponthesematerials,theinformationcontainedhereinorthemeritsofthesecuritiesdescribedherein,andanyrepresentationtothecontraryisanoffence.Dubai:ThisreporthasbeenissuedtopersonsregardedasprofessionalclientsasdefinedundertheDFSArules.Brazil:OmbudsmanJ.P.Morgan:0800-7700847/ouvidoria.jp.morgan@jpmorgan.com.General:Additionalinformationisavailableuponrequest.InformationhasbeenobtainedfromsourcesbelievedtobereliablebutJPMorganChase&Co.oritsaffiliatesand/orsubsidiaries(collectivelyJ.P.Morgan)donotwarrantitscompletenessoraccuracyexceptwithrespecttoanydisclosuresrelativetoJPMSand/oritsaffiliatesandtheanalyst"sinvolvementwiththeissuerthatisthesubjectoftheresearch.Allpricingisindicativeasofthecloseofmarketforthesecuritiesdiscussed,unlessotherwisestated.Opinionsandestimatesconstituteourjudgmentasofthedateofthismaterialandaresubjecttochangewithoutnotice.Pastperformanceisnotindicativeoffutureresults.Thismaterialisnotintendedasanofferorsolicitationforthepurchaseorsaleofanyfinancialinstrument.Theopinionsandrecommendationshereindonottakeintoaccountindividualclientcircumstances,objectives,orneedsandarenotintendedasrecommendationsofparticularsecurities,financialinstrumentsorstrategiestoparticularclients.Therecipientofthisreportmustmakeitsownindependentdecisionsregardinganysecuritiesorfinancialinstrumentsmentionedherein.JPMSdistributesintheU.S.researchpublishedbynon-U.S.affiliatesandacceptsresponsibilityforitscontents.Periodicupdatesmaybeprovidedoncompanies/industriesbasedoncompanyspecificdevelopmentsorannouncements,marketconditionsoranyotherpubliclyavailableinformation.ClientsshouldcontactanalystsandexecutetransactionsthroughaJ.P.Morgansubsidiaryoraffiliateintheirhomejurisdictionunlessgoverninglawpermitsotherwise."OtherDisclosures"lastrevisedJanuary01,2018.Copyright2018JPMorganChase&Co.Allrightsreserved.Thisreportoranyportionhereofmaynotbereprinted,soldorredistributedwithoutthewrittenconsentofJ.P.Morgan.#$J&098$#*P28'